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Traders Still Bullish on Gold, Bearish on Copper

Both copper and gold performed in a similar manner in the recent past, but the outlook for the metals is vastly different. Traders are bullish on gold, but bearish on copper. Why is that?

There is actually a single reason for such different expectations: the European debt crisis. The borrowing costs of the European nations continue to rise, while the credit ratings of Europe’s countries continue to be downgraded by rating agencies. That’s unfavorable environment for industrial metals, but a blessing for precious metals.

So why gold doesn’t look like it’s “blessed”? There are different theories on this matter, but two of them sound most logical. Firstly, the crisis makes investors to run to the dollar and gold suffers from that as it’s inversely correlated to the greenback. Secondly, demand for the yellow metal an inflation hedge wanes as the slowing global economy means slower inflation growth.

Gold closed at $1,681.00 per ounce today on COMEX after opening at $1,693.80. Copper fell to the closing price of $3.2680 per pound from the opening of $3.2730.
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